The Market This Week

Market Snapshot

Dow 12,743.19 +92.83

Nasdaq 2,413.36 +23.50

S&P 500 1,395.42 +1.22%

There is never a dull day on Wall Street and Investors would agree. Yet Monday saw a slight clam compared to the turbulent waves of last week. The Commerce Department released reports of new home sales which were anything but impressive, dropping 4.7 percent in December. Yet such worries provided a small hint of optimism in investors as hopes now soared that the Fed will cut rates to keep the economy, and the stock market for that matter, afloat. The Dow Jones rose more than 176 points, recovering some lost ground.

This advance continued into Tuesday as Wall Street patiently awaits the Federal Reserves decision on cutting the interest rate. It was Wednesday when investors drew a sigh of relief when the Fed finally announced that they will cut rates by 1.25 percentage points and with Thursday investor continued to trade on such optimism, setting aside worries about bond insurers. Yet how long can the Market rely on the rate cuts to support the economy? And when is it time to finally freeze rates? The time should come soon as the dollar continues to weaken and the economy continues to slow. Investors need to begin to face reality. Recession is here.

Last week Apple spooked investors with weaker than expected earnings but this week another shoe dropped, Google. The Internet search engine giant’s earnings and growth “decelerated” more than expected, showing that technology is beginning to seriously feel the worries of the slowing economy. Google’s stock price fell another 7 percent, on top off the incredible drop of 20 % it suffered last week. Googles net revenue missed analyst expectations by only 2 percent. However, online advertising will continue to decrease in profitability as Consumers become more careful about spending and thus to click on ads, providing many red flags for Google’s future.

Wall Street ended a week of modest gains with another advance on Friday, fueled my Microsoft bid for Yahoo for $44.6 billion. Such a ambitious bid by Microsoft signals its’ challenge to Google, giving the leader of online advertising even more to worry about. Such mergers gave a huge boost the Market, good news that has been quite scarce these past few months. Reflection? After last week, Wall Street saw a great improvement and boost in confidence with the Fed rate cut and Microsoft’s bid for Yahoo. But as for recovery, there is no sign of such a miracle yet. The housing market continues to suffer and major money machines such as Apple and Google are only starting to begin to show signs of weakness. This is might be only the beginning.


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